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CVS, Good for Public Health and Good for Shareholders

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Sacrificing at least $1.5 billion in revenue a year, CVS/pharmacy announced on February 5, 2014, that it would pull tobacco products from its stores by October. "The sale of tobacco products is inconsistent with our purpose," the company's press release asserted.

This is no public relations stunt. It is a public health strategy, and it's applause-worthy to witness a Fortune 50 company choosing to be a good steward of the peoples' health while maintaining its fiscal commitment to shareholders.

First, CVS is growing its value in the health of people who live in the thousands of towns where pharmacies are located. While the move will cost CVS $1.5 billion in revenue annually, the company is making a corporate strategic choice to consolidate its position as a company serving up health and health care in its local communities. Consumers covered by health insurance through employers, as well as newly-insured people under plans purchased through Health Insurance Exchanges via the Affordable Care Act subsidies, are facing greater responsibility for making health care decisions and spending.

Increasingly, pharmacies are morphing into health providers bolstering the supply of primary care where people live, work and play. Retail clinics, like CVS's Minute Clinic, will also play a supporting role in filling in gaps caused by the primary care shortage and peoples' lack of a consistent medical home. The pharmacy will be many peoples' go-to medical home -- particularly for younger people, along with others who want to stay apart from the traditional health system.

This evolving role of the pharmacy was described the day of CVS's tobacco announcement in the Journal of the American Medical Association (JAMA). The JAMA Viewpoint observed:

The paradox of cigarette sales in pharmacies has become even more relevant recently, in large part because of changes in the pharmacy industry. Most pharmacy chains are retooling themselves as an integral part of the health care system. They are offering more counseling by pharmacists, an array of wellness products and outreach to clinicians and health care centers. Perhaps more important, pharmacies are moving into the treatment arena, with the advent of retail health clinics. These retail clinics, originally designed to address common acute infections, are gearing up to work with primary care clinicians to assist in treating hypertension, hyperlipidemia and diabetes all conditions exacerbated by smoking.

Once, physicians were guarded about the role of retail health clinics and pharmacies in treading on their clinical turf. Today, the JAMA editorial shows physicians embracing this evolution, which working collaboratively with physicians will enhance population health.

As to the company's shareholder value, it's important to note that CVS/pharmacy is part of the larger CVS Caremark organization, which includes the retail pharmacy chain (the second-largest in the U.S. after Walgreens), a pharmacy benefit management company (Caremark), and retail health clinics (with the Minute Clinic branded chain of urgent care centers found in shopping strips and on main streets). CVS Caremark also participates in a healthy communities program issuing grants for projects that focus on health in local markets.

CVS's Chief Financial Officer and executive management have clearly worked out the numbers on how the company will be able to replace -- moreover, grow -- revenue with its renewed focus on health.

But the company is also enhancing its brand as a responsible corporate citizen -- and a health citizen. CVS's no-tobacco strategy comes exactly when the FDA is re-invigorating anti-smoking efforts aimed at teens in America, discussing through real-life vignettes "The Real Cost" of smoking.

This move by CVS will pay dividends to the store's brand equity. A consumer sentiment is growing in the post-Great Recession economy where consumer trust matters to retailers: most consumers would rather spend a dollar with a company that reflects their values. As trust between people and institutions erodes, good corporate citizenship bolsters engagement with consumers looking for both "value" and "values" in their lives.

CVS's move certainly represents a major sea-change for public health. People co-create health where they live, work, play and shop. CVS/pharmacy is banking that it will win customers, respect, and revenues to replace the $1.5 billion. And the benefit of improved heart health, reduced chronic burden of disease, and household economies saving money on the direct cost of cigarettes? Priceless.

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